Payroll for Remote Workers in Canada

Did you know that 53% of Canadians live paycheck to paycheck? Even small payroll errors can put your employees in financial difficulty. Still, payroll errors are all too common.

Payroll is one of the most critical processes which needs to be handled correctly.

In this article, we will answer some of the most important questions which entrepreneurs ask when they process payroll for remote workers in Canada.

How Do I Register Myself with CRA for Processing Payroll?

Once you register your business with the CRA, you are assigned a unique nine-digit business number. Afterwards, you have to register for a program account. For example, for payroll, you can apply for a payroll deduction account number.

Do I Have to Comply with The Minimum Wage Regulations?

In Canada, all provinces and territories establish and enforce their own minimum wage requirements. Some industries and types of workers have exemptions that put their minimum wage higher or lower than the normal provincial rates. Regardless, it’s your responsibility as an employer to pay your employees correctly based on your province.

Why Do I Need to Pay Overtime to Employees?

Overtime rules are established and enforced by each province and territory as well. Even if your employees commute from across a provincial border, whatever work happens inside the boundary of your province is bound to follow the rules which are set up by your province.

Many provinces classify overtime as anything over 8 hours in a day and 40 hours in a week. The overtime is paid at a rate of 1.5 times the normal pay rate.

Employees in British Columbia can also be entitled to double overtime i.e they will be getting two times the normal pay rate for every work over 12 hours in a day.

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How Do I Calculate Source Deductions? And What Are My Remittances Related Responsibilities?

In regards to remittances, CRA is the mother ship for income taxes and payroll taxes in Canada. In most provinces, the employers pay most of their federal and provincial or territorial payroll taxes to the CRA. CRA then divvies up what taxes belong to itself and sends the remaining payments to the provincial and territorial tax agency.

As an employer, you also have to account for EI and CPP along with the provincial and territorial requirements. For income tax, you are only required to withhold amounts from an employee’s pay whereas EI and CPP required employer contributions as well.

That is in the case of EI, the employer pays 1.4 times the amount withheld from the employee’s paycheck. Whereas in the case of CPP, the employer must contribute an amount equal to the CPP deducted from the employee’s paycheck.

Let’s talk a little more about additional employer cost in Canada.

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Additional Employer Costs

Payroll costs are often a significant, if not the single largest, operating cost of many organizations. The payroll cost can definitely be the top three costs in any organization. In addition to base wages, employers need to recognize an additional minimum cost of employment of about 20%.

The additional cost could be so apart from the base wages which have been given to an employee. That also depends on a few factors like the geographical location as well as the industry that the business is under. Let’s have a look at what could be the additional cost:

1. Employer CPP Contribution

An employer must withhold CPP premiums from employee cheques and match these payments. Premiums change annually, and as of 2021, the rate is 5.45%.

2. Employer EI Contribution

Employer EI contribution is also employment insurance. The second withholding from payment to employees is the EI premium as administered by Service Canada. The rate for contributing EI is 1.58% and the employer must match the employee contribution usually with a factor of 1.4 times.

3. Workers Compensation Premium

Each province and territory administers an insurance plan to provide benefits for workers injured in the workplace. The name of plan and administrative procedures vary across jurisdictions. The industry rates vary significantly based on the historical rate of injury claims from the industry.

4. Employer Health Tax

Provinces and territories fund health care through general tax revenues and transfer payments from the federal government. Some provinces also collect premiums or employer payroll taxes to partially fund health services.

5. Minimum Holiday Pay

After an employee has been with you for 30 days, they are entitled to general holiday off with pay. If they work these days, they must receive time and a half, plus holiday pay. If you have a part-time employee, they are eligible for paid holidays proportional to how many hours they work.

6. Minimum Vacation Pay

In most cases, you have to provide employees with two weeks of paid vacation per year. Based on provincial laws, this number increases as employees stay with the company.

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Do I Need to Issue a Record of Employment?

A Record of Employment provides information on employment history to the CRA. It is the single most important document used by employees to apply for employment insurance benefits.

What Are the Payroll Year to Date Amounts? And Why Are They so Important?

The amount you’ve paid in your payroll taxes in a fiscal year is called your Year to Date Amounts. Your year to date amounts have to be accurate so that you don’t over or under pay your payroll taxes. Moreover, these figures are used for your reports such as your T4s.

Am I Responsible for Issuing T4s to My Employees?

Yes, at the end of the year as an employer you must complete and file a T4 summary report which presents all the payroll tax amounts connected to your business.

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When it comes to growing your company in Canada, nothing is more important than your team. The best team wins in business. Don’t tick your employees off with payroll errors and mistakes.

Swapp Agency helps entrepreneurs realise their financial dreams by optimising their cash flows and helping them reduce their tax bills. Need assistance with payroll for remote workers in Canada?

For more details, visit https://swappagency.com/